Lawsuit alleges that battery startup Envia Systems was founded using stolen intellectual property; Envia denies it

Envia Systems, a battery startup based in the East Bay city of Newark, made a big splash in early 2012 when it claimed it had achieved a milestone: a rechargeable lithium-ion battery with the highest "energy density" ever recorded. The company had been awarded a $4 million grant from ARPA-E, the innovation arm of the Department of Energy, and General Motors invested in the company with the hopes of licensing the technology.

Now, in an explosive and highly detailed lawsuit, three of Envia's top former executives allege that Sujeet Kumar, the company's co-founder and chief technology officer, created the company using intellectual property that he stole outright from Santa Clara-based NanoeXa, his previous employer.

Envia Systems' rechargeable lithium-ion battery.

The 52-page complaint further alleges that when the three executives raised alarms about Kumar's ethical conduct and about how Envia's batteries were performing, Kumar retaliated against them and worked with the company's board of directors to orchestrate the trio's ouster.

A previous lawsuit alleging intellectual property theft filed against Envia by NanoeXa in early 2012 remains in litigation. But the new allegations of stolen intellectual property, if proved to have merit, call into question millions of dollars the company raised from the federal government and private investors. Envia was also awarded a $1 million grant from the California Energy Commission.

"Envia's new battery technology represents exactly the kind of innovations and breakthroughs that ARPA-E is looking for from the American research and development community," said Arun Majumdar, ARPA-E's founding director, in Envia's Feb. 27, 2012, news release announcing the technology. "We hope that this low-cost and high-density battery technology enables widespread adoption of electric vehicles across the country and around the world."

The new lawsuit, filed Nov. 22 in Alameda County Superior Court, was filed by Atul Kapadia, Envia's former CEO; Hari Iyer, the former executive vice president of commercialization; and Rohit Arora, the former vice president of business operations. It alleges that the three former executives, none of whom had experience in the battery industry, joined Envia with the understanding that Kumar had developed revolutionary battery technology that would make mass-market electric vehicles a reality. Kapadia, a former venture capitalist, told this newspaper in an interview earlier this year that he wrote the first $3 million check to help start the company.

Atul Kapadia, former CEO of Envia Systems.
(courtesy of Envia)

"Hari, Rohit and I joined Envia with enthusiasm to help a groundbreaking company deliver affordable clean power to the average American automobile consumer, and poured our efforts into making Envia a success," Kapadia said in a statement released by Harmeet Dhillon, the plaintiffs' attorney. "However, when we raised concerns in the company, we were subjected to retaliation, wrongful termination and defamation. Our lawsuit was filed to obtain justice for what happened to us."

"The allegations in the complaint are baseless," the company said in a statement. "The evidence will show that the plaintiffs' lawsuit is nothing more than the spurious allegations of three disgruntled former employees."

NanoeXa's CEO, Michael Pak, said that the most recent lawsuit bolsters his company's claim that Kumar stole trade secrets.

"We have more than adequate evidence of Sujeet Kumar's blatant misappropriation of NanoeXa's intellectual property as described in the two complaints," Pak said in an email.

The latest lawsuit alleges that Kumar, before leaving NanoeXa in 2007, downloaded gigabytes of files that contained chemical formulas, cell designs, business plans and test results and used the information to form Envia.

"Kumar used the stolen data to form Envia and falsely represented to the public that he personally had independently developed and produced Envia's revolutionary technology," the complaint alleges.

Things came to a head earlier this year when Envia shipped battery cells to General Motors and GM complained that the cells did not perform as expected, according to the complaint. That ultimately led to GM canceling the deal and the ouster of the three executives. GM did not respond to a request for comment.

According to Envia's website, the company's board of directors consists of Kumar, John Walecka of Redpoint Ventures, Takashi Morishita of Asahi Kasei and Purnesh Seegopaul of Pangaea Ventures. John Lauckner, president of GM Ventures, is listed as a board observer. Majumdar joined Envia's board earlier this year but is not listed on the company's website.

Majumdar, who currently works as vice president of energy at Google (GOOG), released a statement stressing that he joined ARPA-E in October 2009, after Envia Systems had completed the application process for the grant.

"The record clearly shows that I had absolutely no involvement in ARPA-E's decision to award a research and development contract to Envia," he said.

Contact Dana Hull at 408-920-2706. Follow her at Twitter.com/danahull.